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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is secretary-general of the African Continental Free Trade Area
Misinformation may have sparked the UK’s anti-immigration riots, but anxieties over illegal immigration are hardly confined to British shores. Pressured by voters, governments across Europe are scrambling for solutions. Conversely, African governments are concerned about the exodus of the educated and entrepreneurial — the dreaded brain drain that stymies development. Yet many of those who leave would, given the choice, prefer to stay at home, anchored in bonds of family, culture, and community. Economic circumstances conspire against this modest wish.
Recognizing the reality, Britain’s new Labour government has pledged £84mn for projects in Africa and the Middle East to address factors driving people to flee. While the funding is welcome, it will fail to bring the economic change Africa requires to stem the root cause of migration: a lack of jobs and opportunity.
True transformation hinges on the rollout of the African Continental Free Trade Area (AfCFTA) — a landmark agreement that binds 54 nations and about 1.47bn people into the world’s largest free trade area. Though rising, Africa trades less with itself than any other continent — changing this will be critical for African prosperity.
What the continent does send to the rest of the world locks it in lopsided trading relationships. A legacy of the colonial era, exports from Africa are dominated by primary goods such as coffee beans, cocoa, and raw minerals, leaving it vulnerable to the vicissitudes of global commodity markets. Outside the continent, refining, processing, and manufacturing add value to these raw materials. Finished goods are then imported back into Africa, thwarting the continent’s ambitions to become an economic powerhouse.
However, when African nations engage in trade among themselves, processed and manufactured goods form more than 42 per cent of their commerce. The AfCFTA will dismantle tariffs on 97 per cent of total tradeable products within the bloc, drastically cutting the costs of trade to drive volume. Rather than exporting jobs abroad, Africa stands to unlock labor-intensive industrialization throughout the continent.
World Bank projections illuminate the AfCFTA blueprint. The initiative is slated to lift 50mn people out of extreme poverty, increase continental incomes, and boost intra-African trade. Meanwhile, investment on the continent could surge as much as 159 per cent. A vast integrated market casts a wider net for global capital, mitigating the risk of investing in individual nations and enabling economies of scale.
To realize this ambitious project, international allies are essential. In 2021, the UK became the first nation outside Africa to sign a memorandum of understanding to boost trade with the AfCFTA, committing funds and providing trade policy expertise to support its implementation. It is vital that the new Labour government continues this work. Not only does it open markets and investment opportunities for UK businesses on the continent, it also offers a coordinated approach to comprehensively address irregular migration.
More allies are needed. While the AfCFTA holds the greatest promise for African prosperity, significant hurdles remain in its implementation. Technical challenges in streamlining regulatory regimes and digitalizing customs procedures persist. Substantial investment is needed to produce made-in-Africa products that will spur decent jobs on the continent.
Above all, the continent’s fragmented transport and logistics networks need investment. Freight lines primarily transport goods from the interior to coastal ports for export, neglecting regional needs. Greater international collaboration is required. The partnership between British International Investment, the UK’s development finance institution, with Emirati logistics company DP World to support the modernization and expansion of ports and inland logistics across Africa is a step in the right direction. But the continent is still facing an infrastructure funding gap of about $100bn annually.
Yet despite formidable challenges, the AfCFTA is making headway. Launched in 2018, its rollout was delayed by the pandemic and the ripple effects of the war in Ukraine. Nevertheless, in October 2022, the first shipments under the AfCFTA framework took place: Kenya and Rwanda exported batteries, tea, and coffee to Ghana. These countries, together with six others, formed a pilot aimed at testing the framework and identifying necessary adjustments. This year, it expanded to include a further 39 nations including South Africa and Nigeria, which exported fridges, bags, ceramics, textiles, cables, smart cards, clinkers, black soap, native starch, and shea butter.
Deep and wide integration will take time. But without structural economic transformation in Africa, the supply of migrants to the west will rise. There is only a long-term solution to this challenge. Better to begin the work now.